Graceful degradation is a self-adaptation technique originally designed for constructing robust services that survive resource shortages. Previous work has shown that graceful degradation can also be used to improve resource utilization in the cloud by absorbing demand fluctuations and reducing spare capacity. In this work, we build a system and pricing model that enables infrastructure providers to incentivize their tenants to use graceful degradation. By using graceful degradation with an appropriate pricing model, the infrastructure provider can realize higher resource utilization while simultaneously, its tenants can increase their profit. Our proposed solution is based on a hybrid model which guarantees both reserved and peak on-demand capacities over flexible periods. It also includes a global dynamic price pair for capacity which remains uniform during each tenant's SLA term.

We evaluate our scheme using simulations based on real-world traces and also implement a prototype using RUBiS on the Xen hypervisor as an end-to-end demonstration. Our analysis shows that the proposed scheme never hurts a tenant's net profit, but can improve it by as much as 93%. Simultaneously, it can also improve the effective utilization of contracts from 42% to as high as 99%.